Taiwan - Does Acceptance Of Stablecoins Constitute The Offense Of Illegal Acceptance Of Deposits Under The Banking Law?
Introduction of stablecoins
A stablecoin is, as its name suggests, a currency with stable value in contrast to bitcoins and etherums with high price volatility. Stablecoins are characterized by a constant value (usually a fixed ratio to the value of strong currencies is maintained) and there are multiple ways to guarantee the value of stablecoins in practice. Some of them are backed by legal tenders such as US dollars or euros as their reserve assets. There are also stablecoins whose value is pegged to a specific cryptocurrency or physical goods.
Statutory criteria for the offense of illegal fundraising activities under the Banking Law
Article 29 of the Banking Law provides that except as otherwise stipulated by law, a non-banking institution shall not operate any business of acceptance of deposits. The so-called “acceptance of deposits” refers to the behavior of accepting “payments” or absorbing “funds” from a multitude of nonspecific people with the agreement that the principals will be returned or sums equivalent to or higher than the principals will be paid. In addition, this definition also applies if “payments” are received or “funds” absorbed from a multitude of nonspecific people due to borrowing, acceptance of investment, solicitation of shareholders or other reasons with the agreement that bonuses, interest, dividends or other compensations obviously incomparable to the principals are agreed or paid. (Refer to Articles 29-1 and 5-1 of the Banking Law.)
So far, there is a court hold that virtual currency is not “deposit” under Article 29 of the Banking Law
According to the above provisions of the Banking Law, the so-called “acceptance of deposits” under the Banking Law also includes the two scenarios of accepting “payments” or absorbing “funds.” In practice, court decisions in Taiwan hold that “payments” refer to currencies in circulation (including foreign currencies), while “funds” are not limited to currencies in circulation, any money that can be used or applied for the sake of financing to create currency value that satisfies material or wealth needs of society should be included.
The Taiwan High Court recently rendered the 107-Jin-Shang-Su-83 Decision, holding that in case tangible objects or intangible rights are accepted or absorbed if they are not the above-mentioned business that a bank may handle pursuant to law, even if they are handled by a non-banking institution, this does not violate the principle of professional operation by banks and is not even a target of regulation or penalty under the Banking Law.  To wit, according to such court opinion, since accepting cryptocurrencies is currently not a type of business that a bank may engage in, the Banking Law does not apply to the non-banking institution which engages in the business of acceptance of cryptocurrencies.
There are foreign authorities have identified the stable currency as a payment instrument or deposit and thus is subject to the relevant laws and regulations
Currently, there have been quite a few foreign competent authorities who have included “stablecoins” in their regulatory framework, for example, the Payment Services Bill as amended and adopted in Singapore in 2019 have specifically included the issuers of e-money in the regulation, and the “e-money” regulated under this bill includes any digital means to store value (with their value denominated by any currency or pegged to any currency as agreed by the issuers); and FINMA in Switzerland promulgated the “Supplement to the guidelines for inquiries regarding the regulatory framework for initial coin offerings (ICOs),” which specifically provides that stablecoins converted into the legal tender by a fixed conversion rate should be regarded as deposits under the banking law.
Suggestions for Taiwan investors and the operators engage in stablecoin in lieu of conclusions
I. From the perspective of investors, since stablecoins have not been officially included in the scope of regulation, and products that appeal to stablecoin deposits and guarantee returns in the market are not scrutinized by the FSC, the investors should be more prudent and heed if their own rights have been adequately safeguarded through contract provisions and should carefully determine their own investment risks.
II. From the perspective of operators, since neither the competent authority nor the majority courts in Taiwan have specifically indicated the nature of “stablecoins” in practice, the possibility that judges in other courts may consider foreign legislative for reference and interpret stablecoins as “deposits” so as to arrive at the conclusion that absorbs stablecoin may constitute the offense of illegal absorption of funds under the Banking Law cannot be excluded. In addition, in view of the diversity in the design of stablecoin products, usually, the relevant operators may not be able to correctly identify whether they are issuing financial products and whether they are governed by other relevant financial laws and regulations. Therefore, if the operator wishes to completely eliminate legal risks, it seems that it is feasible to apply for a pilot in a regulatory sandbox in accordance with the Financial Technology and Innovative Experimentation Law before the competent authority formulated more specific control measures for stablecoins to ensure that the current business may be exempt from the application of relevant financial laws and regulations.
For further information, please contact:
Elva Chuang, Lee Tsai & Partners
 The author is a lawyer of Lee, Tsai & Partners. However, the contents of this article merely reflect personal opinions and do not represent the position of this law firm.
 The 105-Jin-Shang-47 Criminal Decision of the Taiwan High Court and the 107-Jin-Shang-Su-83 Decision of the Taiwan High Court
 The 107-Jin-Shang-Su-83 Decision of the Taiwan High Court.